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Even with recycling and substitution, there’s only so far rare earth consumers can stretch available supplies

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The development of a Western source of rare earths would secure the supply chain for consumers but with a domestic supply still years away some end-users are looking for other ways to limit their exposure before it's too late.

"Arguably somewhere between 90 and 97 percent of rare earths, depending on who you talk to and when, comes from China. I think the real issue is how fast market demand goes up and whether or not the supply chain can keep up with that demand," said Steve Constantinides, director of technology at Rochester, N.Y.-based Arnold Magnetic Technologies Corp., which manufactures samarium-cobalt magnets at its Swiss facility.

"We have visited our suppliers in China and they've assured us that we will not experience a shortage of raw materials. However, that doesn't mean they can guarantee the supply. To some extent, because China is not a totally free market, there is a possibility of government intervention either with export quotas, tariffs or (some other form of) intervention in the market. So we have a concern, but we think that it is not an uncontrollable situation."

Sources in the permanent magnet and technology sectors say consumers can take a more proactive role by implementing a number of mitigation strategies, from recycling to substitution.

One is General Electric Co., a large-scale consumer of critical materials that spends some $4 billion on metals and alloy purchases every year. Although rare earths are indispensable to many of the company's final products—like neodymium in its new generation of incandescent light bulbs—GE is still working to mitigate its rare earths exposure through reclamation and recycling, optimized manufacturing and, when applicable, materials substitution.

"Once an element is identified as high risk, a comprehensive strategy is developed to reduce this risk. This can include improvements in the supply chain, improvements in manufacturing efficiency, as well as research and development into new materials and recycling opportunities. Often a combination of several of these may need to be implemented," Steven Duclos, chief scientist at GE's Global Research Center in Niskayuna, N.Y., told a U.S. House of Representatives Science and Technology subcommittee, which is investigating the possible material shortage. "An optimal solution is to develop technology that either greatly reduces the use of the at-risk element or eliminates the need for it altogether."

But other downstream manufacturers say such a shift is easier said than done. Although using rare earths more efficiently and implementing closed-loop recycling processes could alleviate some of the anticipated supply pressures, sources said rare earths recycling would be risky, challenging and downright expensive.

It's risky because only the Chinese currently have the level of expertise needed to recycle rare earths, they said. "Since virtually all of the chemical processing of the raw material to the oxide and to the metal is taking place in China, that means sending what is going to be recycled over to China for reclamation," Constantinides said, noting that even if recycling capabilities were to evolve stateside the process would be extremely challenging. "There's not a real simple way to take the little magnets out of so many devices and efficiently and effectively feed them back into a company that could go through that reprocessing effort."

But the real deterrent would be the cost, sources said. Recycling has been wildly successful in other sectors of the metals industry, but with rare earths prices averaging between $11 and $13 per kilogram reclamation is significantly less attractive.

"It's a very good idea for somebody to develop recycling technologies that would be economical, particularly in line with the fact that these rare earths are not that expensive. You don't have that tremendous payback on recycling," said Peter C. Dent, director of business development at Electron Energy Corp., Landisville, Pa.

The push for substitution also brings its challenges. Although Duclos said GE has been successful in inventing new or utilizing existing materials to minimize supply risk, other consumers say rare earths are one place where substitution is rarely an option.

"In terms of alternative materials, the rare earth magnets have properties that make them so superior to alternative materials for weight, power, temperature capacity, etc. that there is no simple substitute," Constantinides said. "In terms of chemical composition variations, we're all looking at ways to reduce demand for the more sensitive rare earth materials in these applications, but that search has been going on in excess of 20 years. There still is no substitution that has been announced or is in sight at this time."

Dent agreed, noting that while the next generation of permanent magnets is looking to reduce the amount of rare earths material needed by adding up to 30 percent more iron, there's no guarantee such a shift will take off

"There is a very high risk of some sort of failure to get rid of rare earths in these very high-strength permanent magnets. And even if you do, you're still going to be at less performance than what's available now," Dent said.

So while internal mitigation strategies might make sense in the long term, consumers say other strategies—like filing a World Trade Organization case against China or developing a federal stockpile—must be implemented immediately to ensure today's concerns don't become tomorrow's crisis.

"You can do some things in terms of mitigation, but you're going to spend a gazillion lifetimes trying to mitigate or replace this stuff when these elements have some superior characteristics that are really important, so why not just fix the problem? Make rare earth metals not rare metals in the great scheme of things," Dent said. ANNE RILEY

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